Tag Archives: international monetary system

Gold Is Going To Play A Role In A New Monetary System. Interview Koos Jansen by ‘Dutch Financial Times’

In the Netherlands we have a financial newspaper that prints on pink paper and is named “Het Financieel Dagblad”. Basically it’s the Dutch equivalent of the Financial Times. A few weeks ago I was interviewed by two of their reporters, Joost van Kuppeveld and Lenneke Arts. Today the interview was published as part of a series of interviews with gold experts, among others, with myself and Aerdt Houben, Director Financial Markets at the Dutch central bank (DNB). Perhaps not surprisingly I disagree with several statements of Houben in his interview, to which I would like to respond in a forthcoming post. For now, you can read my interview below. In case readers didn’t know my real name is Jan Nieuwenhuijs, and Koos Jansen is my Internet alias. Het Financieel Dagblad preferred to disclose my real name.

Original source at Financieel Dagblad, published 29 October 2016. Translated by Koos Jansen.

Gold Is Going To Play A Role In A New Monetary System

Jan Nieuwenhuijs

Profession: Precious metals analyst at BullionStar.com

Owns gold since 2010

“The whole world is now in the same boat. Everywhere there are low interest rates and on all continents money is printed. Only the United States has paused printing for the moment.

There are many flaws in fiat money. You can print it without limitations, which is politically too tempting. Fiat money printing was used to save the financial system in 2008, but since then nothing has changed. Banks are not split. In a next crisis it’s going to end badly with paper money. There will be significant inflation.

Gold is a hard currency. It can’t be printed – like fiat money. It is divisible and it does not perish. It retains its purchasing power in the long term. If it’s in the center of the monetary system, it will also be more stable in terms of purchasing power in the short and medium term. That has to do with economic principles; it is a commodity.koos-jansen-fd-2016-smaller In that respect I feel safe by keeping a portion of my savings in physical gold. I am protected from economic shocks. If the euro falls gold rises, and so my purchasing power is maintained.

Something has to happen in the international monetary system. It cannot stay centred around the dollar. Since 1971 – when the dollar was detached from gold – the United States has an exorbitant privilege. Most trade in the world is settled in dollars. Therefore, there is a huge demand for dollars in the world, and the US can simply print these dollars.

In the new system gold is going  play a role. Look at the developments in Europe. The Netherlands and Germany get their gold back from America. Austria and Belgium are also repatriating. Russia and China buy a lot of gold. The Chinese have too many dollars in foreign exchange reserves and are therefore at the mercy of the whims of US policy. The transition to a new system will be gradual. No one wants a new shock.

With my blog I try to fill the gap between mainstream media, who do not understand gold, and conspiracy theorists. I always try to seek the truth. Because if we get a new financial crisis, we must know the truth. The Dutch central bank shouldn’t state it holds 600 tonnes if it can’t show us the audit reports and gold bar list. That’s why I’m pushing for the audit reports and gold bars list to be publicly released, but those requests find a lot of resistance at my national bank. While you would think they can be fully transparent. What’s there to hide?”

The End Of Bretton Woods And The Race To The Bottom, 1971

I stumbled upon a few interesting reads about the end of the Bretton Woods system in August 1971. In those years there was a lot of monetary turmoil, just like now. Before 1971 the US dollar was pegged to gold, and foreign countries held dollars in reserve because the US had promised they were “as good as gold”. The dollar came under pressure because the US money supply grew, but they insisted to keep the gold price at $35. Many European countries were redeeming their dollars for gold, because the dollar was overvalued relative to gold.

Official gold reserves

This led to a drain in US official gold reserves (I you are wondering were the rest of the US gold stock went, consider reading this)

Note, due to technical reasons from here on this post might cause errors on tablet devices and mobile phones. I hope to solve this issue within 24 hours. In the meantime you can read this post on desktop/laptop browsers. 

The US wished to devalue the dollar against all currencies (in the hope to boost export and stimulate domestic industries) except gold. A higher gold price in dollars would increase the dollar value of European gold holdings. Additionally it would hurt the credibility of paper money in general and thus could destabilize the US dollar Hegemony. The US was keen to exploit the advantages of issuing the world reserve currency, without limitations being imposed by gold.

The French were the most critical on US’ monetary policy, in 1965 the French president De Gaulle made a speech in which he stated gold should be the base in the international monetary system, not the dollar.

The London Gold Pool, a group of nations controlling the price of gold at $35, collapsed in March 1968. Hereafter a two-tier system existed; a free market gold price and an international payment price under the Bretton Woods system (at $35). Central banks could actually buy gold from the US Treasury at $35 and sell it on the open market at $40. Subsequently the gold window was closed by Nixon in August 1971 – after pressure from his Treasury Secretary John Connally. In a TV presentation he announced to temporarily suspend the convertibility of dollars into gold (because “evil speculators” were attacking the dollar), and so the Bretton woods system came to an end.

Nixon also announced an import surcharge of 10 %, which made foreign goods 10 % more expensive for American consumers, to boost domestic growth. After the Nixon Shock negotiations started between the biggest economies about the value of their currencies relative to each other and gold. I will publish a few historical diplomatic documents from this era. Below you can read a phone call Nixon made with Kissinger on October 28, 1971.

Richard Nixon: US President

Henry Kissinger: US National Security Advisor

John Connolly: US Treasury Secretary

Arthur Burns: US Chairman Of The Federal Reserve

Peter Peterson: US Assistant To The President For International Economic Affairs

George Shultz: US Director Of The Office Of Management And Budget

Paul McCracken: US Chairman Of The President’s Council of Economic Advisors

Willy Brandt: Chancellor Of Germany

Georges Pompidou: President Of France

P stands for president, K for Kissinger

Nixon kissinger

Two months later Kissinger, pretending not to know anything about economics, negotiated these monetary affairs with Georges pompidou. On December 13 at Azores at Mr Pompidou’s residence.

And another meeting the next day at Azores between Kissinger and Pompidou.

Eventually, after the currency war, the dollar had lost more than 50 % of its value in 1981. Devaluation can be a short term fix but, but causes long term problems.

In Gold We Trust